Fayetteville among cities most vulnerable to sequestration, report says

By Drew Brooks

The Fayetteville Observer, N.C.

Published: February 20, 2013

FAYETTEVILLE, N.C. — A report released Monday lists Fayetteville among the U.S. cities that could be hardest hit by sequestration, the sweeping cuts to federal spending scheduled to begin in March.

But North Carolina should be relatively well insulated from the cuts, said senior economist Mark Vitner of Wells Fargo Securities.

Vitner was one of two authors of the report, which looked at which states are most vulnerable.

The Washington, D.C. area and Southern states will be hardest hit, according to the report, which lists Hawaii and Alaska as among the states most likely to be affected.

North Carolina is in better shape than many of its neighbors, Vitner said, because it ranks relatively low on the list of states with the highest percentage of gross domestic product tied to federal spending.

The deadline for Congress to avoid sequestration is March 1.

If lawmakers do not come to an agreement on deficit reductions by then, automatic cuts to the tune of $85 billion would be triggered.

According to the Pew Center on the States, whose data was used for the report, North Carolina ranks 28th for federal spending as a percent of state GDP. The Tar Heel state is characterized as being at "moderate risk."

But Fayetteville and Jacksonville, home to the state's largest military installations, are singled out.

"Smaller towns that host large military bases are probably the most vulnerable areas in the sequestration battle because so much of their economic wellbeing is tied to the continued flow of defense dollars," the report states.

"Following years of strong growth, Fayetteville and Jacksonville, North Carolina have seen their economic fortunes turn.

"Growth," the report states, "had previously been fueled by troops relocating from other bases after the last round of base closings and an influx of earnings that flowed in from the surge of troops fighting in Afghanistan."

Vitner said that defense spending had been a tailwind for Fayetteville, home to Fort Bragg, and Jacksonville, home to Camp Lejeune Marine Corps Base.

Wartime spending spurred growth during a period when most other cities struggled.

But now, what was once a benefit is now a detriment, Vitner said.

Of particular concern to Fayetteville is the possibility of reduced soldier training, curbed repairs and maintenance of military equipment, federal civilian worker furloughs and eventual Army personnel cuts, Vitner said. Even without sequestration, spending cuts will occur.

"There's not much good news in the budget process for the military," Vitner said.

An Army report released earlier this year outlined a worst-case scenario for Fort Bragg that included the loss of 8,000 soldier and Department of Defense civilian jobs and millions of dollars of lost tax revenue.

Since that report was released, economists have criticized the Fayetteville economy for being too dependent on the defense industry.

In a separate release, the Foreign Policy Initiative, a bipartisan think tank in Washington D.C., released a letter directed to Congressional leadership asking them to take action to stop sequestration.

The letter, signed by 71 national security experts, has been endorsed by retired Fort Bragg generals Hugh Shelton, James Lindsay and Buck Kernan.

"Sequestration will result in unacceptable risk for U.S. national security," the letter reads. "It will degrade our ability to defend our allies, deter aggression, and promote and protect American economic interests. . It will be a self-inflicted wound to American strength and leadership in the world."

Eventually, Vitner said, sequestration and other cuts could lead to another round of base realignment and closure in the coming years.

However, he doesn't expect Fort Bragg to be at risk.

"I would have to believe," he said, "that Fort Bragg would be in pretty good shape."